Liquidity, Order Flow and Market Microstructure

Absorption

Absorption occurs when substantial aggressive buying or selling is met by enough opposing liquidity that price makes relatively limited progress.

Aggressive Buyer

An aggressive buyer is a market participant who accepts available sell prices to execute immediately rather than waiting for sellers to trade at a...

Aggressive Seller

An aggressive seller is a market participant who accepts available buy prices to execute immediately rather than waiting for buyers to trade at a h...

Bid Ask Imbalance

A bid ask imbalance describes a meaningful difference between buying and selling activity measured at bid and ask prices. The exact definition depe...

Buy Absorption

Buy absorption describes a situation where aggressive buying is met by substantial sell liquidity, limiting further upward price movement.

Buy Pressure

Buy pressure describes market activity in which buying demand is exerting upward pressure on price or aggressively consuming available sell liquidi...

Cumulative Volume Delta (CVD)

Cumulative Volume Delta, commonly called CVD, tracks the cumulative difference between aggressive buying volume and aggressive selling volume over...

CVD Divergence

CVD divergence occurs when price and Cumulative Volume Delta move differently in a way that traders consider meaningful. For example, price may mak...

Footprint Chart

A footprint chart displays detailed trading activity within individual price bars, commonly showing executed buying and selling volume at specific...

Hidden Liquidity

Hidden liquidity is trading interest that is not fully visible in the publicly displayed order book.

Iceberg Order

An iceberg order is an order structure in which only part of the total order quantity is displayed publicly while additional quantity remains hidde...

Liquidity Cluster

A liquidity cluster is an area where a relatively large concentration of orders or potential trading liquidity is located. The term can refer to vi...

Liquidity Grab

Liquidity grab is a trading term commonly used to describe a relatively quick move through an area of expected liquidity followed by a rejection or...

Liquidity Pool (in trading)

In trading analysis, a liquidity pool can describe an area where traders expect a concentration of executable orders, stops or other market activit...

Liquidity Sweep

A liquidity sweep occurs when price trades through an area where orders or liquidity are concentrated, triggering or executing that activity as pri...

Maker Volume

Maker volume refers to trading volume associated with orders that were resting as liquidity before being executed against.

Market Buy

A market buy is an aggressive buy instruction that executes against available sell liquidity in the order book. It typically trades against one or...

Market Impact

Market impact is the effect an order or series of orders has on market price as it consumes available liquidity.

Market Sell

A market sell is an aggressive sell instruction that executes against available buy liquidity in the order book. It typically trades against one or...

Order Book Imbalance

Order book imbalance describes a difference between visible buy and sell liquidity in an order book according to a particular measurement.

Order Flow

Order flow is the study of buying and selling activity as orders interact with available market liquidity. It focuses on how trades are actually be...

Passive Order

A passive order is an order that rests in the market waiting for another participant to trade against it rather than immediately crossing the sprea...

Price Acceptance

Price acceptance describes market behavior suggesting that participants are willing to continue trading around a new price area rather than immedia...

Price Rejection

Price rejection describes market behavior where price trades into or through an area but fails to remain there and moves away relatively quickly.

Sell Absorption

Sell absorption describes a situation where aggressive selling is met by substantial buy liquidity, limiting further downward price movement.

Sell Pressure

Sell pressure describes market activity in which selling is exerting downward pressure on price or aggressively consuming available buy liquidity.

Spoofing

Spoofing is manipulative trading behavior involving orders placed with the intent to cancel them before execution in order to create a misleading i...

Taker Volume

Taker volume measures trading volume generated by orders that execute against liquidity already available in the market. It can often be separated...